An Overview of SBA Loan Options – Paycheck Protection Program & Economic Injury Disaster Loans

In response to the novel coronavirus (COVID-19) pandemic affecting the small business community across the country, the U.S. Small Business Administration (SBA) is offering 2 types of loans for small businesses to help through this unprecedented time; the Paycheck Protection Program and Economic Injury Disaster Loans. Below is a brief summary of each type of loan. At this time, you may only receive funding from one option. 

Economic Injury Disaster Loans (EIDL)

SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance per small business and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.  The loans can be used to fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. 

The Small Business Administration (SBA) has added the State of Idaho as an Eligible Disaster Area.  This provides our small businesses the ability to apply for an SBA Disaster Loan during this time of economic injury.  Below is some key information regarding this loan.

  • The loans are available for small businesses, small agricultural cooperatives, small aquaculture businesses and most private non-profit organizations
    • Some businesses that are not eligible are: agricultural enterprises, religious organizations, charitable organizations, casinos, racetracks, and real estate developers
  • The businesses can qualify for loans up to $2 million with interest rates at 3.75% (2.75% for nonprofit organizations) with terms up to 30 years.
    • The funds are to be used for working capital and not to refinance existing debt
    • The SBA loan officer will determine the approved amount and loan terms upon approval of the application
  • Any loans over $25,000 will require collateral
    • SBA takes real estate as collateral when available
    • They will not decline a loan for a lack of collateral but will require borrowers to pledge what is available
  • There is no cost to apply, no obligation to take the loan if approved, and no prepayment penalty
  • There is personal guarantee regardless of the amount of the loan for any owners owning more than 20%
  • The borrower has the opportunity to defer payments for up to 12 months
    • Interest will accrue at the beginning of the loan
  • Processing time typically takes 3-4 weeks from accepted application to money in the bank
    • The typical decision time is 21 days
    • When the decision is made on the amount and terms, paperwork is sent to you for signature
    • When the signed paperwork is received by the SBA the funds are directly deposited into your checking account typically within 2-3 business days
  • If you are interested in applying, we recommend to complete the applications as soon as possible. The 3-4 week turn around will likely extend in response to the size of the pipeline.  You can determine at the time of approval if you’d like to accept the loan.
Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is part of “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) that was recently passed.  The PPP provides short-term cash flow assistance to small businesses to support their employees during this time of economic distress.  The PPP loans are provided by the SBA through their certified lenders guaranteed by the federal government.

  • Eligibility Period
    • PPP loans must be made for the period prior to June 30, 2020
  • PPP Eligible Businesses
    • Businesses with less than 500 employees, operations as of February 15, 2020, and was substantially impacted by COVID-19.
      • Businesses not eligible are churches, cannabis companies, casinos, land developers, and any business involved in an illegal or prurient activity are not eligible per federal law
      • Affiliation rules of limiting to one entity are waived for this loan in certain industries
    • Use of PPP Loans
      • The funds received under the PPP loan requirements must be for the following expenses:
        • Payroll (salaries, wages, vacation, parental, family, medical, or sick leave, severance, retirement benefits, and state or local taxes)
        • PPP funds cannot be used to pay salaries over $100,000
        • Costs for related group health care benefits
        • Employee commissions and tips
        • Interest on mortgage payments (not applicable for principle portion of payments) and on additional debt incurred prior to obtaining the loan
        • Rent and utilities
      • Payment Forgiveness
        • For the first 8 weeks from the origination date of the loan, specified funds may be forgiven when used for payrolls costs, mortgage interest, rent, and utility as described above. 
        • The amount of loan forgiveness cannot exceed the principle amount of the loan
        • To get the full benefit of loan forgiveness, the business must keep their employees and pay at least 75% of their prior year compensation
        • The amount of forgiveness will be reduced by the comparison of current year and prior year FTEs.
        • Businesses must submit applicable supporting documentation to request the available loan forgiveness
      • Payment Deferral
        • Payments can be deferred for 6 months up to one year
      • PPP Loan Terms
        • Loan amounts can be as large as 250% of the business’s average monthly payroll cost over the last 12 months not to exceed $10M
        • As well as salaries over $100,000 not counted in this payroll calculation
        • Interest rates cap at 4%
        • Terms can be up to 10 years from the origination date
        • No collateral or personal guarantee

The professionals at Harris CPAs are here to guide you and can assist you in determining which loan is the right fit for your business, and completing your application.

For more information on the Paycheck Protection Program:

For more information on the Economic Injury Disaster Loan:

< Back to Harris CPAs COVID-19 Resource Page

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